Vol 9 (2012) - Issue 4

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Spaceright Europe Limited v Baillavoine and another [2011] EWCA Civ 1565

Background
The Court of Appeal handed down its judgment in Spaceright Europe Limited v (1) Mr B Baillavoine, (2) The Secretary of State for Business Innovation and Skills on 14 December 2011.
The Court of Appeal considered whether the reason for the dismissal of an employee by the administrators of a company prior to a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ('TUPE') was 'connected with the transfer', making the dismissal automatically unfair.
The Court of Appeal upheld the decisions of the Employment Tribunal and the Employment Appeal Tribunal (the 'EAT') such that, where an employee had been dismissed in order to make the employer company a more attractive prospect for sale as a going concern, the dismissal could be automatically unfair even if the exact details of the transfer were unknown at the time of dismissal.

TUPE and accompanying legislation
TUPE implements the provisions of the Directive 2001/23/EC. It applies to 'relevant transfers', which means transfers of undertakings and businesses, or parts of them, situated in the UK, and to service provision changes. Where a relevant transfer occurs, TUPE is intended to protect employees by transferring their contracts of employment, along with any rights and liabilities connected with their employment, from the transferor to the transferee. Under Regulation 7(1) of TUPE, where a relevant transfer occurs, any dismissal of an employee will be deemed to be automatically unfair for the purposes of the Employment Rights Act 1996 if the sole or principal reason for the dismissal is the transfer itself, or a reason connected with the transfer that is not an economic, technical or organisational one (an 'ETO reason').

Facts and decision
(a) Background
Mr Baillovoine had been employed by Ultralon Holdings Limited as Chief Executive Officer from 3 September 2003 until it was put into administration (along with its subsidiary, Ultralon Limited) on 23 May 2008. On that day, Mr Baillovoine was dismissed along with 43 other employees. The Ultralon companies ('Ultralon') subsequently went into liquidation.
On 25 June 2008 the business and assets of Ultralon were sold to the defendant, Spaceright Europe Limited ('Spaceright'). Mr Baillovoine issued proceedings against Spaceright claiming that his dismissal from Ultralon was automatically unfair under Regulation 7(1) of TUPE, it being common ground between the parties that liability for unfair dismissal had passed to Spaceright under TUPE.

(b) Employment Tribunal judgment
A statement from the administrators was put before the Employment Tribunal in which they claimed that Mr Baillovoine’s dismissal had been for cost-saving purposes after they had deemed his role non-essential. However, the Employment Tribunal also found as fact that the administrators had decided to continue trading Ultralon’s business with a view to selling it as a going concern. The Tribunal was required to decide whether or not the sole or principal reason for Mr Baillovoine’s dismissal had been the transfer itself, or if it had instead been for reasons relating to the conduct of the business. The Tribunal found that Mr Baillovoine had been unfairly dismissed since there had been an intention to sell the business and a purchaser would not require someone of his position. The dismissal was therefore connected with the transfer. In addition, the ETO reason defence in Regulation 7(2) and (3) of TUPE was not available to Spaceright as the reason for the dismissal did not entail any changes in the workforce.